IndusInd Bank Q2 Results: Net Profit Falls 53% On Higher Provisions

IndusInd Bank Ltd.’s profit fell by more than half in the quarter ended September as provisions rose over the year ago.

Net profit of the private lender dropped 53% year-on-year to Rs 663 crore in the July-September period, according to an exchange filing. That compares with the Rs 611-crore consensus estimate of analysts tracked by Bloomberg. The bank’s earnings stood at Rs 510 crore in the preceding three months.

Net interest income, or core income for the bank, however, rose 12.7% year-on-year to Rs 3,278 crore, against the Rs 3,331 crore forecast.

Its asset quality improved in the reported quarter. Gross non-performing asset ratio stood at 2.21% against 2.5% as on June 30. Net NPA ratio, too, improved to 0.52% in the second quarter, down 34 basis points sequentially.

IndusInd Bank said it followed instructions of the Supreme Court in the Gajendra Sharma v/s Union of India case and did not report certain accounts as NPA after Aug. 31. If the apex court order was not in place, the bank’s gross NPA and net NPA ratios as on Sept. 30 would have been at 2.32% and 0.61%, respectively.

Provisions for the July-September quarter, however, rose to Rs 1,964 crore from Rs 738 crore a year ago. But that’s a decline from the Rs 2,259-crore provisions made in the three months ended June.

Owing to the impact of the Covid-19 pandemic, the private bank said it has made additional provisions worth Rs 952 crore during the July-September quarter, taking the total pandemic-related provisions to Rs 2,155 crore.

“The extent to which the Covid-19 pandemic will impact the bank's operations and financial results is dependent on the future developments, which are highly uncertain,” it said in the notes to accounts.

Shares of IndusInd Bank closed 0.59% lower before the results were announced, compared with a 0.24% drop in the Nifty 50 Index.

Going ahead, the bank will continue to make provisions against the pandemic as the need arises, said Sumanth Kathpalia, the lender’s managing director and chief executive.

IndusInd Bank said the total amount of loans which have taken asset quality benefit under the Reserve Bank of India’s term loan moratorium stood at Rs 4,419.85 crore.

Speaking to reporters after releasing the bank’s second-quarter results, Kathpalia said the lender is in the process of identifying accounts that need to be restructured under the RBI’s Aug. 6 circular.

“We believe the share of restructured accounts will be in the low single digits over the entire loan book,” Kathpalia said. “Currently our collections efficiency has improved to 94.7% and we expect this to improve to 96-97%. The rest can be seen as the bank’s stressed portfolio.”

As on Sept. 30, the bank’s total advances improved to Rs 2.01 lakh crore, up 2% year-on-year. Total deposits rose 10% from a year ago to Rs 2.28 lakh crore in the second quarter.

According to Kathpalia, the bank is now ready for asset growth and that this growth will be led by auto loans, microfinance loans and secured retail lending products. The bank is aiming to launch a used car financing business in the next six months, he said.